One of the things my kids asked for Christmas was a Windows 7 install with a local vhd. So here is what I did.
Similar to the method that you delete the local bitlocker partition here is how you install Windows 7 into a vhd
At the beginning of the GUI install press:
Shift + F10
In the command prompt window:
Diskpart
Inside the diskpart control:
Select disk 0
Create part primary
Select part 1
Format fs=ntfs quick
Assign letter=c (note that the letter is not a factor in these steps nor does it apply to how the drive is viewed later)
Create vdisk file=c:\win7.vhd type=fixed maximum = 30000 (or whatever size, this is in KB)
Attach vdisk
Exit
Exit
Continue install
Once the install is complete you will see 2 local disk drives. C:\ will be the interior of the vhd. D:\ will be the actual local drive with a single file. This file will be the vhd created above: d:\win7.vhd.
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How to install Windows 7 into a local VHD
